None of us are born with instinctive financial literacy — managing money is a learned skill. And experts say it’s never too early to start helping your children understand money.

In fact, your children have been watching how you handle money since before they could walk and talk. And while you don’t need to be a money expert yourself to help them learn and mature in their financial lives, there are steps you can take now to help your children get off on the right financial foot.

Always Watching

Children learn from watching you earn, shop, save, and borrow — you’re the top influence on their financial lives.

Experts at the Consumer Financial Protection Bureau (CFPB) identified behaviors, knowledge, skills, and personal characteristics that appear to help people achieve greater financial well-being within their own circumstances. They then put together the building blocks people tend to develop as children, which can have a lasting impact on financial well-being in adulthood.

TRY THIS: THINK OUT LOUD

From your actions, your children often draw their own conclusions — and sometimes they might not be what you intended! When you think out loud, you clarify what you’re doing and why. Try getting into the habit of thinking out loud during your day-to-day money and time management, so your kids can follow along.

Skills Develop in Stages

There are three broad childhood developmental stages where different skills and behaviors come into focus (and they continue to develop into adulthood).

Development of these behaviors, knowledge, skills, and personal characteristics overlap multiple developmental stages and can develop at different periods based on each child’s maturity level. Understanding these stages is key in helping your child understand money at an age appropriate level.

What Can Develop During This Time

Pre-elementary school / Early childhood, ages 3–5

Executive function – The mental processes that enable us to plan for the future, focus our attention, remember information, and juggle multiple tasks.

Elementary to middle school / Middle childhood, ages 6–12

Financial habits and norms – The attitudes and mental shortcuts that help us navigate our day-to-day financial lives.

High school and young adulthood / Teen years and beyond, ages 13–21

Financial knowledge and decision-making skills – The ways we intentionally seek out and apply information, compare alternatives, take action, and review the consequences.

By helping your children develop important behaviors, knowledge, skills, and personal traits — when they are developmentally ready — you can help put them on a path to financial well-being in adulthood.

Q: Are there activities I could use to teach my child about needs and wants?

Answer: When trying to teach your children about needs versus wants, consider pointing out items like food and clothing as you shop and ask them to tell you which category each fits.

Understanding the difference between needs and wants is a bedrock concept that can lead to a lifetime of better financial decision making.

Needs include the basic things we need to survive — food, clothing, and shelter. But we also need to earn a living so we can pay for those basic needs and things we want. So, we need reliable transportation and the tools and resources necessary to do our jobs well. We also need to build and protect our assets so we can keep meeting our needs in the future — this includes emergency savings and insurance.

Wants are all the upgrades and other things that would be nice to have but aren’t necessary for living, earning and protecting what we have. Knowing the difference is the key to purchasing decisions, and the payment choices that young people will face one day.

Activities to Try:

When you are out shopping, point out essentials such as food and clothing, and ask your child to describe items that she may want but are optional.

Talk about how your family decides what to buy and what to pass up. Which is more important: Buying cookies or fresh fruit? Soda or milk?

Draw a circle and divide it into sections for food, rent or house payments, clothes, and “optional items,” to show that there is a finite amount of money to spend.

Remember:

Keep in mind that you’re teaching about money, on purpose or not

Your children are constantly watching and listening, so they might absorb more than you think. When you shop for a bargain, or splurge on a treat, or plan a special occasion, you’re showing your kids how you think about money.

Don’t worry too much about things you don’t know

Don’t feel confident about money matters? You’re in good company. Most people don’t. And that’s okay. Every day, you excel at something your children need to learn –—whether it’s managing your time between work and home, saving money when you shop, or planning for a future event.

R. Brian Williams retired after 30 years in the U.S. Army, both on active duty and in the AGR program as a member of the Alabama National Guard, working at NORTHCOM, JDOMS and the U.S. Army War College. He is currently enjoying retired life, but misses his time in uniform.